By JONATHAN CHEVREAU
Monday, November 12, 2018
Founder of the Financial Independence Hub, author of Findependence Day and co-author of Victory Lap Retirement
While I reached the traditional retirement age of 65 last April, I continue to work steadily in semi-retirement (a.k.a. the victory lap). But when my wife Ruth, one year my junior, said she will follow suit next year and leave her executive position, I knew it was time to get serious about planning our actual retirement cash flows. As Ruth puts it, "We need a financial plan and a life plan."
To that end, I consulted retirement planning packages from three Canadian firms. The first was a duo of packages from Emeritus Retirement Strategies in Burlington, Ont.: Better Money Choices (BMC) and Retirement Navigator. Emeritus founder and chief executive Doug Dahmer likens the former to a do-it-yourself gym membership, and the latter to a personal trainer.
Things were getting more real this summer, by the time I encountered Ian Moyer's Cascades Financial Solutions Inc., which helps financial advisers make projections for clients. Then early this fall I looked at Viviplan, created by Rona Birenbaum, founder of fee-for-service financial planning firm Caring for Clients.
These cloud-based packages work on either PC or Mac computers, although on the Mac I found BMC and Viviplan work best on the Chrome browser. All require you to input data from tax returns, brokerage statements, Service Canada projections of Canada Pension Plan/Old Age Security income, employer pension plan statements and any other sources of expected retirement income.
Some, such as Viviplan, accept downloads of the actual documents.
You'll also need a handle on expenses: bank and credit-card statements, charitable donations, utility bills, property taxes and the like. And you need to think about your future lifestyle, particularly travel plans in retirement or potential health issues. The programs tote up your net worth so you'll want a guesstimate of the value of your principal residence or other real estate, any business assets, collectibles, automobiles and anything else with resale value.
Ideally, you would try one of these programs five or 10 years from your projected retirement date: the sooner the better. Wait until 65 and you may find yourself running out of certain options.
For example, I had already decided to collect OAS when I turned 65, even though BMC recommended deferring it, as well as CPP, to the age of 70. That's what the other programs also recommend for us, with accelerated registered retirement savings plan (RRSP) drawdowns in the lowerincome years between 65 and the registered retirement income fund (RRIF) commencement date after 71.
These programs are particularly valuable for those where at least one member of a couple - or a single person - lacks a traditional employer-sponsored defined benefit pension plan where payouts are guaranteed for as long as you live, no matter how financial markets perform.
While the big decisions tend to be common with these programs, they vary in things such as the order of withdrawing retirement income: Some say to draw down non-registered accounts first, others suggest drawing down registered accounts first, although they agree that tax-free savings accounts (TFSAs) should be the last to tap.
Asset allocation isn't the main focus of the quantitative output, but it is addressed in the formal recommendations. For us, two programs suggested a conservative mix of 60 per cent fixed income to 40 per cent equities for couples of our age and investment temperament.
Seeing as we have minimal defined-benefit pensions, one question we had was whether to partly annuitize in our mid- or late 60s; for example, convert a portion of our RRSPs to life annuities through a life insurance company, thereby mimicking DB pension plans in their ability to guarantee not outliving our money.
(Once we are both no longer employed, we plan to keep earning some business income on a freelance or consulting basis, which the programs can accommodate.)
Viviplan certified financial planner Morgan Ulmer said we could annuitize if we wished, but there was no compelling reason to do so and it could be deferred to later. The programs encouraged us to "live a little" (Mr.
Dahmer's words) and to spend a little more in retirement. Since we are not anonymous, we can't divulge specifics of our financials: suffice it to say we're now at what Mr. Dahmer calls the "work optional" stage, which is pretty much my personal definition of financial independence - working because you want to, not because you have to, financially speaking.
Here's a summary of the strengths and weaknesses of each program.
BETTER MONEY CHOICES/RETIREMENT NAVIGATOR Strengths: BMC provides detailed qualitative assessments that dig out the lifestyle you desire from retirement, letting you explore the implications of key choices before committing to them. It's strong on the tax side of retirement income and optimal order of withdrawals. Retirement Navigator takes BMC's outputs and projects future cash flows based on spending needs that may fluctuate over time.
Weaknesses: Good at identifying peaks and valleys of spending during retirement but less explicit on year-by-year projections.
Price/availability: Annual subscription for BMC is $120, with a free seven-day trial and an online chat. Provides access to inhouse chartered financial planners (CFPs) at additional fees that vary with complexity. Retirement Navigator's Retirement Income Draw Down Plan has a $2,500 one-time fee, providing year-byyear guidance on cash flow and optimizing retirement income sources. If there are any significant updates to the plan in the future, that would again incur the fee.
CASCADES FINANCIAL SOLUTIONS Strengths: Thorough year-byyear projections of investment account balances, CPP and OAS payments, OAS clawbacks, and income splitting. Compares competing withdrawal strategies to illustrate which accounts to draw from first, and which are better deferred. Tax tables include income splitting and tax credits.
Weaknesses: Tends to be more linear in projections, less variable in charting the spending ups and downs and one-time big expenses. Doesn't optimize tax savings in the accumulation stage.
Price/availability: Available to financial advisers for $125/ month but individual consumers can get a one-time report for $85.
VIVIPLAN Strengths: Comprehensive on the expenses side - it doesn't let you forget even such easily overlooked expenses as boarding your pet while on vacation.
Strong on insurance and estateplanning considerations.
Weaknesses: Final report is thorough, but slightly padded with some boilerplate explanations of basics like what a RRIF is.
Price/availability: One-time fee of $800 plus HST depending on province. Service is direct to clients, not via financial advisers.
Wait time six to eight weeks. However, it is planning an option for clients to belong to its Viviplan Gold service, which will include continuing ad-hoc support and annual follow-ups to their plan.
Conclusion: For high-networth individuals approaching retirement and concerned about outliving their money, any of these programs can do the job. A single strategic insight or two can easily recoup the modest fees charged. If they judge you to be in good financial shape, that's welcome peace of mind. If they conclude you need to work longer and/or save more, the sooner you see the situation in black and white and start to take steps to address it, the better.
WHAT YOU NEED TO KNOW FOR THE WEEK AHEAD MONDAY Japan's Producer Price Index is released.
China's aggregate yuan financing, new yuan loans, M2 money supply and foreign direct investment are announced.
U.S. and Canadian bond markets are closed for Remembrance Day.
Earnings include: AGT Food and Ingredients Inc.; Americas Silver Corp.; Aurora Cannabis Inc.; Avesoro Resources Inc.; Badger Daylighting Ltd.; Cargojet Inc.; China Gold International Resources Corp. Ltd.; Leagold Mining Corp.; MCAN Mortgage Corp.; Magellan Aerospace Corp.; Mountain Province Diamonds Inc.; NuVista Energy Ltd.; Osisko Mining Corp.; Sprott Inc.; Taiga Building Products Ltd.; West African Resources Ltd.
TUESDAY Germany's Consumer Price Index (CPI) and ZEW Survey are announced.
U.S. budget deficit for October is released. Estimate is US$116.5-billion, rising from US$63.2-billion a year ago.
Earnings include: Africa Oil Corp.; Alexco Resource Corp.; Algoma Central Corp.; Automotive Properties REIT; Canaccord Genuity Group Inc.; Cardinal Resources Ltd.; Cronos Group Inc.; DHX Media Ltd.; Dream Unlimited Corp.; GoldMoney Inc.; Harte Gold Corp.; Innergex Renewable Energy Inc.; Inovalis REIT; InterRent REIT; Intertain Group Ltd.; Iron Bridge Resources Inc.; Logistec Corp.; Mediagrif Interactive Technologies Inc.; Mosaic Capital Corp.; Nemaska Lithium Inc.; Neptune Wellness Solutions Inc.; New Look Vision Group Inc.; Orca Exploration Group Inc.; Park Lawn Corp.; Premium Brands Holdings Corp.; Tidewater Midstream and Infrastructure Ltd.; Timbercreek Financial Corp.
WEDNESDAY Japanese real GDP, tertiary industry index and industrial production are released.
China's industrial production, retail sales and fixed asset investment are announced.
Euro zone real GDP and industrial production are unveiled.
Germany reports real GDP.
U.S. CPI for October is released. The Street expects a rise of 0.3 per cent from September and 2.5 per cent year-over-year.
U.S. Federal Reserve chair Jerome Powell discusses national and global economic issues at the Dallas Fed.
Earnings include: Agellan Commercial REIT; Aimia Inc.; Birchcliff Energy Ltd.; Boardwalk REIT; Bonterra Energy Corp.; CAE Inc.; Canopy Growth Corp.; Cineplex Inc.; Computer Modelling Group Ltd.; Concordia International Corp.; Echelon Financial Holdings Inc.; Gluskin Sheff + Associates Ltd.; Imperial Metals Corp.; Loblaw Cos. Ltd.; Macy's Inc.; Marathon Gold Corp.; Peyto Exploration & Development Corp.; Pure Gold Mining Inc.; Sienna Senior Living Inc.; Stelco Holdings Inc.; Stornoway Diamond Corp.; Wheaton Precious Metals Corp.
THURSDAY Euro zone trade surplus is revealed.
Canadian existing home sales for October are announced.
Estimate is a decline of 6 per cent year-over-year with average prices rising 1 per cent.
Canada's ADP Employment Report for October is released.
Canadian motor vehicle sales for September are unveiled.
U.S. retail sales for October are announced. Consensus is a rise of 0.6 per cent from the previous month. Excluding automobiles, the projection is a rise of 0.5 per cent.
U.S. import prices for October are released. The Street expects a rise of 0.1 per cent from September and a 3.4-percent jump year-over-year.
U.S. Philadelphia Fed index for November is unveiled.
U.S. initial jobless claims for week of Nov. 10 are announced.
Estimate is 215,000, rising 1,000 from the previous week.
U.S. business inventories for September are released. Consensus is an increase of 0.3 per cent from August.
Earnings include: H&R REIT; Plaza Retail REIT; ProMetic Life Sciences Inc.; Sprott Inc.; Walmart Inc.
FRIDAY Euro zone CPI is announced.
Canadian manufacturing sales for September are unveiled. Consensus is a monthover-month rise of 0.4 per cent.
Canadian international securities transactions for September are released.
U.S. industrial production for October is released. Consensus is a rise of 0.2 per cent from September.
Better Money Choices, one of a number of cloud-based retirement-planning packages, provides detailed assessments that determine the kind of lifestyle you want out of retirement.